IDEAS home Printed from https://ideas.repec.org/a/taf/jnlbes/v29y2011i3p356-371.html
   My bibliography  Save this article

Volatility Jumps

Author

Listed:
  • Viktor Todorov
  • George Tauchen

Abstract

The article undertakes a nonparametric analysis of the high-frequency movements in stock market volatility using very finely sampled data on the VIX volatility index compiled from options data by the CBOE. We derive theoretically the link between pathwise properties of the latent spot volatility and the VIX index, such as presence of continuous martingale and/or jumps, and further show how to make statistical inference about them from the observed data. Our empirical results suggest that volatility is a pure jump process with jumps of infinite variation and activity close to that of a continuous martingale. Additional empirical work shows that jumps in volatility and price level in most cases occur together, are strongly dependent, and have opposite sign. The latter suggests that jumps are an important channel for generating leverage effect.

Suggested Citation

  • Viktor Todorov & George Tauchen, 2011. "Volatility Jumps," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(3), pages 356-371, July.
  • Handle: RePEc:taf:jnlbes:v:29:y:2011:i:3:p:356-371
    DOI: 10.1198/jbes.2010.08342
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1198/jbes.2010.08342
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jnlbes:v:29:y:2011:i:3:p:356-371. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/UBES20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.